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What is your reckon our system of government works? It could be something like this. We elect MPs. They legislate on bills. Should a majority is secured, the bills pass into law. Statutes are enforced by the courts. End of story. However, that was how it operated in the past. Those days are over.

The Rise of Offshore Tribunals

In the modern era, foreign corporations, and the wealthy individuals behind them, are able to litigate against elected administrations for the policies they pass, at offshore tribunals staffed by business advocates. The cases take place behind closed doors. Unlike our courts, these tribunals provide no avenue for appeal or legal review. You or I cannot take a case to them, just as our government, or even companies based in this country. The door is open solely for corporations operating from foreign soil.

When a secret court finds that a law or policy may compromise the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

These sums represent not real financial harm but money the panel members conclude the company could potentially have made. The administration may have to abandon its policy. It will be deterred from introducing similar legislation along the same lines, due to the risk of facing litigation.

A Mechanism Running Rampant

Unprecedented levels of cases are being filed, as companies observe each other, and investment funds finance suits for a share of a share of the settlements. The consequence? National sovereignty and popular rule are turning into unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it can trump domestic law and the rulings taken by elected bodies is that this stipulation has been incorporated – absent public approval, and often in conditions of profound opacity – within trade treaties.

A Specific Case: The Cumbrian Coal Mine

Last year, a conservation group achieved a major legal triumph at the High Court. The justice found that proposals to excavate the first deep coalmine in the UK for 30 years, in Cumbria, had been wrongly permitted by the Conservative government, which had endorsed the bizarre claim that the mine would have no impact on our carbon budgets. The incoming administration later cancelled the consent the previous administration had issued. Now, this victory is under threat by an offshore tribunal reporting to no one but the companies petitioning it.

In August, a company whose final controllers are based in the tax haven initiated proceedings versus the UK government. Recently a dispute settlement body in the US capital was convened to adjudicate on it.

The company is litigating against the UK for the money it might have made if the mine had been permitted to proceed. Citizens have no clear indication how much this might be. What legal team is representing it against the UK administration? A sitting MP, and ex-law officer in the outgoing administration, the self-proclaimed patriot the MP. The government makes a decision, the high court upholds it, then a overseas corporation disputes it through an secretive offshore tribunal, and a elected official works for its behalf.

The Russian Lawsuit

On the same day that the court on the coalmine case was appointed, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows nothing of the case at present, but it seems likely that he may employ the ISDS mechanism to fight the penalties the UK enacted against him after the invasion of Ukraine. He has previously initiated proceedings against Luxembourg for this reason, claiming sixteen billion dollars: equivalent to half of nation's yearly budget. Included in the lawyers on his side? the wife of a former prime minister, spouse of the ex-UK leader.

Trade specialists believe that the EU’s delay in leveraging immobilised state funds as guarantee for its loan to Ukraine arises from concerns within Belgium that it could be sued in the offshore corporate courts, under a trade agreement. This unprecedented, undemocratic power over sovereign states could be blocking the finance Ukraine urgently requires.

False Assurances and Growing Risks

Politicians promised that these events were not possible. Years ago, a former prime minister, advocating for the biggest and most dangerous of all such treaties, declared: “Britain has agreed to trade deal upon trade deal and there has never been a problem in the past.” An adviser on this matter accused critics of “exaggeration … the fact is, ISDS barely touches the UK much”. The general impression was crafted to be that exclusively weaker states needed to fear ISDS claims. Predictions that “as corporations start to realise the power they’ve been granted, they will redirect their efforts from the vulnerable countries to the wealthy nations” were dismissed with widespread derision.

That warning has come to pass. Recently, energy and extraction companies have filed a record number of suits against nations rich and poor, challenging – like the example of the UK mine – government attempts to halt climate breakdown. Firms have so far won vast sums through ISDS, of which oil majors have obtained the majority. That equates to the combined GDP